No deal yet on student loan rates

An impasse in the Senate between a bipartisan group of negotiators and Democratic leadership will likely prevent the upper chamber from passing a solution to the doubling of student loan rates this week.

Sens. Joe Manchin (D-W.Va.), Richard Burr (R-N.C.), Angus King (I-Maine) and Tom Coburn (R-Okla.) are set to formally introduce their proposal later Wednesday or Thursday that would prevent federal loan rates from skyrocketing from 3.4 percent to 6.8 percent on July 1.

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The quartet of senators wants to peg the loan rates to 10-year Treasury bonds plus 1.85 percent, which would put current rates at 3.66 percent. All loans would be capped at 8.25 percent, slightly below the the 8.5 percent cap passed by the House. The Senate group’s proposal would also lock in the interest rate for the life of the loan — a key request of President Barack Obama.

But Senate Democratic leadership is not yet behind that proposal. Adam Jentleson, a spokesman for Majority Leader Harry Reid (D-Nev.) said there is “no deal,” which means that the most likely scenario means the Senate will have to pass a student loan bill retroactively.

“There’s certain people I guess that want to do a short-term fix and that’s not me. And a few of us aren’t in that direction. We have a bipartisan agreement,” Manchin said in an interview.

King said that the language is finalized but the supporters aren’t.

“It’s just a question of who the final sponsors will be,” King said.

The bipartisan group’s bill is closer to what Senate Republicans pitched several weeks ago than what Democrats pitched, which included closing some tax loopholes. Both those proposals failed when put to votes. Jentleson said Republicans are insisting the the bill include deficit reduction at the expense of higher student loan rates. An initial CBO score for the bipartisan group’s bill showed $8.6 billion in deficit reduction.

“Democrats continue to work in good faith to reach a compromise but Republicans refuse to give on this critical point,” Jentleson said.

“We’d rather see it double to 6.8 than the alternatives we’ve seen,” Durbin said was the message from those organizations.

The approach from Burr, Manchin, Coburn and King does have the backing of Republican leadership. Don Stewart, a spokesman for Republican Leader Mitch McConnell, said unless Democrats embrace the bipartisan deal, loan rates will rise.

“Senate Republicans, along with the President, are ready to pass bipartisan student loan reform that will ensure that student loan rates don’t double on July 1st. Why Senate Democrats continue to attack the President’s plan is a mystery to me, but I hope he’s able to persuade them to join our bipartisan effort to assist students,” Stewart said.